Refinery shutdown looms as diesel stockpile reaches critical levels

KARACHI: The reduced upliftment of petroleum products -- particularly high-speed diesel (HSD) -- has led Attock Refinery Limited (ARL) to shut down one of its crude distillation units, while other refineries across the country are also operating at low capacity.

ARL informed the Oil & Gas Regulatory Authority (Ogra) that due to lower offtake of petrol and HSD, its inventory has risen sharply. HSD stocks, in particular, have reached critical levels, with minimal ullage remaining. In response, ARL has shut down one of its crude distillation units, with a capacity of 5,000 barrels per day (BPD), from Wednesday.

The refinery was already operating at 70 per cent capacity, and the shutdown of the unit has further reduced throughput and feed availability for downstream processing units. At such low throughput, continued operation of these units cannot be sustained for long.

“If the current situation persists and there is no improvement in petrol and HSD upliftment, ARL will be forced to shut down the refinery completely within the coming week,” the company stated.

Other refineries are also facing similar challenges. Pak-Arab Refinery Limited, Pakistan Refinery Limited, National Refinery Limited, and Cnergyico Pakistan Limited are all experiencing operational difficulties due to the low offtake of HSD.

According to data available with The News, HSD sales declined by 37 per cent in the first week of April, while petrol sales also saw a 3.0 per cent decrease.

“The country currently has 50 days’ worth of HSD stock due to low upliftment,” a senior refinery official told The News. The total HSD stock has risen to 700,000 metric tonnes (MT). “If the government permits further imports under these circumstances, the refining sector could face a complete shutdown,” the official warned. He also expressed concern that influential parties may pressure the government to allow more HSD imports, as was done in recent months, without factoring in domestic supply and demand.

HSD inventory has reached dangerously high levels due to increased imports in recent months, despite the sector being regulated. Refinery ullage is now constrained, forcing a reduction in production, which could subsequently increase the need for petrol imports.

If the situation continues, HSD stocks could exceed 800,000 MT by the end of April. With daily demand averaging around 16,000 MT and local refineries producing about 14,000 MT per day, the allowance of further imports -- an additional 138,000 MT expected in April -- would result in a total system inflow of 460,000 MT by the end of the month.